Running yield is calculated as which of the following?

• A. Market value / coupon rate x 100
• B. Coupon rate x market value
• C. Face value / market value
• D. Coupon rate / market value x 100

Answer: (D)

Running yield shows the income you earn from a bond relative to its current price. It’s the annual coupon payment, in currency, divided by the market price, expressed as a percentage. If the coupon rate is quoted per unit of face value (typically per 100), the annual coupon amount is the coupon rate, and the current yield becomes coupon rate divided by market value, then multiplied by 100 to convert to a percentage. In formula form: running yield = (coupon rate / market value) × 100. This captures how much income you get today for each unit of price you pay.

Other forms don’t match this idea. Using market value divided by the coupon rate flips the ratio and loses the percentage of price relation. Multiplying the coupon rate by market value mixes cash flow with price in the wrong way, giving a currency figure instead of a yield percentage. Using face value instead of price ignores the actual market price you’d pay today.